Perhaps we need also to explain the one complement number system.

You see, numbers are represented with one complement's number system. Under that system, when you want to get the negative of a number you inverse all the bit and then you add 1 to the bit.

So, 1 is 00000001... Inverse it and you got 11111110, add 1 and you got 11111111

So -1 is encoded as 11111111

Why one complement?

Say you want to add 1 with -1, you just add them as usual and ignore the left most carry all and get 0.

Hence, the same circuit used to add 2 positive numbers can be used to add negative numbers too without any change. That's good for computer's design point of view.